New Law Changes
In 2005, congress changed the Bankruptcy law extensively. The 2 main changes directly impacting Debtors are the educational requirements and the means test. I will go over these in our first meeting.

Chapter 7 Bankruptcy, succinctly put, is an exchange of non-exempt assets for a discharge of debts. Most of the exemptions in Colorado are listed in C.R.S. 13-54-101 as amended. An exemption is property that the Bankruptcy Code or applicable state law permits a debtor to keep from creditors. Exempt property is property or value in property that a debtor is allowed to retain, free from the claims of creditors who do not have liens. Some debts, such as taxes accrued within the last 3 years, domestic support obligations and student loans, with exceptions, are not dischargeable. A trustee is appointed to your case and he/she will make a determination as to whether or not your assets are exempt; he or she will “sell” non-exempt property, either back to you or to the highest bidder, in order to distribute funds to creditors.

Chapter 13 Bankruptcy, is a repayment/reorganization of the debts of an individual who has regular income. The regular monthly expenses of the debtor are determined, and the excess of income is paid to the bankruptcy trustee for distribution to the creditors. This is called the Chapter 13 Plan. Payments are generally made over a 3 year period, sometimes extended to 5 years, after which a discharge is entered. Secured creditors are usually treated differently than unsecured creditors. A “secured” creditor is one who has collateral as security for the debt. For instance, if your home is in foreclosure due to non-payment, you can spread the payment of arrearages over a three to five year period of time. The amount paid to your unsecured creditors may be reduced, depending on the amount of “excess income” that is paid into the Plan.

Danger: There are negative aspects to filing bankruptcy. Your credit rating will suffer. It may become more difficult to get a mortgage to purchase a home or refinance your home; obtain auto insurance; or obtain credit generally. Chapter 7 and 13 Bankruptcies may be reflected on your credit report for up to 10 years.

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